Temasek, a state investor from Singapore, will concentrate on early adopters of AI in the U.S. while being cautious about China.

• Despite its portfolio value increasing by almost 2% to SGD $389 billion ($288 billion) in its financial year ending March, the firm expressed caution about the Chinese market.
• According to Rohit Sipahimalani, Temasek's chief investment officer, while the U.S. may seem expensive overall, the S&P equal weight index is currently at 16 times earnings, which is below its long-term average.
• Temasek is also optimistic on opportunities in the U.S. India and Japan.

The state investment company, Temasek of Singapore, announced on Tuesday that it will continue to invest most of its capital in the U.S. The focus of its investment will be on traditional industries that are early adopters of AI technology in the country.

According to Rohit Sipahimalani, Temasek's chief investment officer, while the U.S. may seem expensive overall, the S&P equal weight index is currently at 16 times earnings, which is below its long-term average.

Americas region makes up 22% of Temasek's portfolio, although the company did not provide a detailed breakdown of its exposure to U.S. assets.

Despite its portfolio value increasing by almost 2% to SGD $389 billion ($288 billion) in its financial year ending March, the firm expressed caution about the Chinese market.

Despite China's government adopting a pro-growth stance to aid its recovery, the economy still faces structural challenges, and without an increase in domestic demand, inflation rates and economic growth will continue to be under pressure.

According to Temasek deputy CEO Chia Song Hwee, the challenges facing China are primarily related to the demand side of the economy.

Chia stated that companies that "drive or satisfy domestic consumption" in sectors such as biotech, robotics, electrification, and the electric vehicle value chain will be interesting.

The firm is focusing on companies that are less dependent on exporting to other countries and can thrive solely in the domestic market, as some businesses with export potential may face geopolitical risks.

Temasek will remain watchful and closely observe government policies in the world's second largest economy, the state investor stated. The percentage of Chinese assets in Temasek's portfolio decreased from 22% in the 2023 financial year to 19%.

Additionally, the company is considering investing in Japan, where there has been a rise in interest from foreign investors due to its market growth this year.

Corporate governance reforms in Japan are benefiting the country's corporate scene through structural and cyclical tailwinds, as explained by Alpin Mehta, deputy head of private equity investments in Temasek.

"We have observed an increase in private equity activities in Japan over the past few years. As investors, we have invested in some of these funds. Our plan is to collaborate with them by doing co-investments."

Temasek's exposure to Japan has increased to 1% from "almost nothing a couple of years back," Mehta stated, emphasizing that it is still the "early days." Some of Temasek's portfolio companies, including Vertex Capital, Capitaland, and Mapletree, have exposure to Japan, he added.

The company views prospects in India because of a substantial domestic market, supply chain diversification, and Europe, where it recognizes opportunities in the green energy transition.

In the 2024 financial year, Temasek invested SG$26 billion in sectors including technology, financial services, and healthcare.

In countries other than Singapore, the majority of Temasek's investment capital was allocated to the U.S., then India and Europe.

Portfolio performance

Temasek's net portfolio value increased to SG$420 billion from SG$411 billion after marking its unlisted assets to market.

As unlisted assets now make up 52% of our portfolio, up from 20% in 2004, we have decided to release this metric as mark to market value to align with our peers.

Sipahimalani stated that over the past ten years, we have gained a competitive advantage on the private side due to our improved access and ability to collaborate with these companies.

The firm does not have a specific target ratio for unlisted and listed assets in its portfolio, but will invest when it identifies suitable opportunities.

We must maintain a balance between liquidity and private assets. Although there is no specific objective, we are content with the current equilibrium.

Despite a slight decline in the 20-year total shareholder return, Temasek's 10-year total shareholder return remained steady at 6%, while its one-year total shareholder return increased by 1.6% from a 5% decline in 2023.

The exclusion of the 2004 financial year resulted in a 46% one-year TSR following the SARS pandemic.

The company divested SG$33 billion for the financial year, resulting in a net divestment of SG$7 billion, compared to a net investment of SG$4 billion a year ago.